Digital Nirvana Is In The Eyes Of Banking Consumers

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Bankers think customers want new technology, but what they really want are the benefits that digital technology can provide. Can banking create a better consumer experience as opposed to just introducing the 'next shiny object'?

Strolling around recent banking conferences, one thing that stood out was the emphasis on AI and other ‘trendy’ new technology. As Brad Smith from Cornerstone Advisors , everywhere a banker or credit unions executive looks, there are references to varying forms of the new nirvana – ‘AI-driven, digital transformation.’

But, refreshingly underneath the all too prevalent ‘tech-hype’ is a more philosophical conversation about how tech and people should intersect. For instance, , Bank of America’s chief operations and technology officer, recently led a particularly insightful discussion about how AI should fit into a financial institution’s strategy.

“It’s not about what can AI do, but what should AI do.” — Cathy Bessant, Chief Operations & Technology Officer, Bank of America

Brett King, author and founder of Moven, in a keynote address saying banks too often layer digital services over existing products, instead of creating a new experience.

“[Sometimes digital banking] is an iteration on the existing bank model. [It should be about offering] real-time, instant capabilities where banking is embedded in your life.” — Brett King, author and founder of Moven

It’s an opinion we’ve heard before. Dr Wei Ke of Simon-Kucher & Partners argued this in an interview with Launchfire published in 36kr earlier this year, giving the example of mobile deposit.

“At face value, [mobile deposit] seems like a pretty cool feature. But if you really think about it, the whole feature in and of itself is kind of ridiculous. Why bother creating some sort of 21st century technology to hold on to a piece of paper that’s been around since the 17th century?” — Dr Wei Ke, Head of Financial Services, Simon-Kucher & Partners

So what’s going on? Why is there so much attention given to the seemingly limitless ways we could use new digital technology, instead of the ways we should use these new tools?

‘Groupthink’ Mentality

One factor that Dr Wei Ke pointed out in our interview is the ‘groupthink’ mentality of the banking industry.

“If one bank jumps on board with some kind of so called innovative idea, what tends to happen is then everyone starts to jump on board. But what’s usually not clear is whether they have a deliberate strategy or not.” — Dr Wei Ke, Head of Financial Services, Simon-Kucher & Partners

You can see this play out in the rapid growth of financial institutions offering mobile remote deposit capture. In 2014, just under half of financial organizations in the United States offered this service — 2 years later, that number had reached over 70%.

The same trend is also evident with mobile P2P payments. According to from the Federal Reserve, in 2014, just 26% of banks and credit unions offered a P2P payment service. By 2016, that number had nearly doubled — and it’s expected to hit 79% by the end of 2018.

The risk with this “we need to have it because our competitors have it” mindset is technology (like AI) is sometimes implemented as a check mark feature to remain ‘competitive’ against competition, instead of to solve a problem for consumers.

Focusing on Cost Savings as Opposed to Customer Experience

The origin of many technologies, from ATMs to online and mobile banking had their beginning as a cost-saving alternative as opposed to a way to deliver a better customer experience. This cost-saving mindset is part of why you see financial institutions replace in-store human functions with a digital alternative, instead of re-imagining the banking experience. It is also why early iterations of digital banking looked more like a teller screen than a customer-focused application.

But, swapping out traditional features for a digital alternative won’t keep financial institutions competitive for long. Especially when small fintech firms and large tech organizations build with a consumer-centric mindset. And as Dr Wei Ke pointed out, unique digital experiences can actually become a new revenue stream.

Banks and credit unions are forgetting [that] there are some unique experiences we can create in the digital channels. That basically means revenue options.” — Dr Wei Ke, Head of Financial Services, Simon-Kucher & Partners

Thinking Tech-First

We spend a lot of time talking about the implications of new technology. Just do a quick Google search about “the future of AI in banking”, and you’ll see what I mean. The problem with this perspective is that bankers can start to believe that consumers want technology when what they really want are the benefits of that technology.

There’s a risk in looking at digital strategy from a technological perspective first. You start to think ‘we need to be investing in AI’, instead of identifying customer pain points and looking for solutions (technological or not) to solve them. As a result, investments aren’t always a priority for customers — there are other innovations they’d prefer to have first.

“One example is voice banking — we did test it — and a lot of consumers were like, ‘Okay, you can do voice banking and that’s great, but can you just get me a card in 24 hours or can you get me access to my money or self-service fraud? Those are things that actually affect my day to day. Don’t throw sexy technology at me that I’m not going to use.’ ” — Alexandra Nuth, managing director of ATB Financial

So what should a bank tor credit union do? Cathy Bessant summed it up pretty well.

“Innovation must be driven by what customers want, not by what banks think they want.” — Cathy Bessant, Chief Operations & Technology Officer, Bank of America

Improving customer experience doesn’t necessarily mean adding new technology. It means re-imagining how banking fits into customer’s lives, looking for ways to reduce friction or solve pain points — then implementing the technology that’s necessary to achieve that new experience. And then promoting that change to customers.

Admittedly, it’s easier said than done. But, without that mentality shift towards ‘consumer-first”'(arguably another overused but little-understood buzzword) we’re going to see a lot of cool but ultimately useless (and unused) innovations.

A set of digital initiatives without an overarching strategy perpetuates operational silos of redundant, incompatible systems, and disconnected data sets. Success begins with a vision and a plan. Click Here